2024Q1 operations are under pressure. They are optimistic that mid-to-high-end upgrades will drive profit growth. Maintaining the “buy” rating, the company achieved revenue of 831 million yuan (-12.23%, same ratio, same below), net profit to mother 190 million yuan (-11.51%), and net profit from non-return to mother of 169 million yuan (-11.95%) in 2023. 2024Q1 achieved revenue of 117 million yuan (-32.96%), net profit attributable to mother of 0.2 billion yuan (-44.5%), and net profit of non-return to mother of 0.18 million yuan (-47.25%). Due to the downturn in real estate, industry demand is sluggish. We lowered our 2024-2025 and added a profit forecast for 2026. The company's net profit for 2024-2026 is 2.0/2.1/220 million yuan (the original value for 2024-2025 was 21/230 million yuan), the corresponding EPS is 1.08/1.13/1.19 yuan, the current stock price is 13.3/12.7/12.1 times. The company's channel changes are compounded by favorable trade-in policies to maintain the “buy” rating.
The all-in-one steaming and grilling model is leading the national sales volume, and e-commerce and offline direct sales channels are growing rapidly. Looking at various channel construction by product, revenue in 2023 was -16.40%/+53.52%/+31.60% year-on-year, respectively, accounting for 86.47%/7.61%/4.67% of revenue, respectively. According to Euromonitor data, the company achieved the leading sales volume of integrated steaming and roasting models (including simultaneous steaming) integrated stoves for five consecutive years in 2019-2023. By channel, dealer/e-commerce, offline direct sales and other revenue in 2023 were -16.8%/+66.2%/+69.8% year-on-year respectively.
Comprehensive channel expansion: (1) Offline specialty stores: more than 100 new and optimized dealers. (2) Online: Adjust product layout, open up new channels, and increase operational investment. (3) Home improvement: Cooperate with more than 1,200 local home improvement outlets, and add 3 new general home improvement companies to cooperate with general home improvement companies. (4) Sinking channels: The sample stores covered more than 300.
Profitability was steady in 2023, and profitability declined in Q1. I am optimistic that the mid-high-end upgrade will drive profit to increase the 2023 gross profit margin by 46.86% (+0.76pcts), and the 2024Q1 gross profit margin by 44.59% (-3.12pcts). By product, the gross margin of integrated stove/other kitchen utensils/wooden cabinets in 2023 was 49.4%/24.4%/30.4%, respectively, +1.4/+12.8/+12.1pcts, respectively. By sales model, in 2023, the company's dealer/e-commerce, offline direct sales or other gross margins were 46.05%/51.11%/50.12%, respectively, and +0.97/-3.02/+6.31 pcts, respectively.
On the cost side, the cost rate for 2023 was 22.04% (+0.32pcts), with sales/management/R&D/finance expense ratios of +1.04/-0.17/-0.19/-0.36pcts, respectively. The 2024Q1 period cost ratio was 25.51% (+3.05pcts), with sales/management/R&D/finance expense ratios of +4.13/+4.77/+1.02/-6.86pcts, respectively. Under the combined influence, net interest rate due to mother was 22.84% (+0.19pcts) in 2023, after deducting non-return net interest rate of 20.29% (+0.07pcts).
2024Q1 net profit margin 18.94% (-3.94pcts), net non-return rate 15.26% (-4.13pcts) after deducting non-return net interest rate. The company's cash dividend rate in 2023 was 60.15%.
Risk warning: risk of falling demand; risk of raw material prices; channel reforms falling short of expectations.